Rental property can provide a favorable rate of return and steady cash flows, but only if you have the right strategy in place, including the services of a property management company. Some of the steps for maximizing rental income involve thoroughly screening tenants, establishing longer lease periods and collecting on late fees when applicable. These steps enhance the potential for better outcomes.
Perhaps one of the largest variables in realizing the most rental income is tenants. The reliability of tenants and their ability to pay rent on time is critical. To find the right renters, you can use a property management company to screen applicants, so those with bad credit or poor payment histories can be weeded out. This process does come with a cost, but most property owners do it because it’s such an important point. Renters that don’t pay on time and abuse homes can zap your rental income and cause you to realize only minimal returns over the long run.
The less vacancy you have, the more income you’ll generate over the long term. For this reason, it’s good to establish longer lease periods with stable renters. While there are advantages to month-to-month and six-month contracts, having a one-year lease in place helps stabilize cash flows. The longer a stable renter is in a home, the better, but if the renter is poor and has a long contract, the situation can turn into a disaster. For this reason, it’s important to determine whether or not a renter is reliable, before establishing a long lease period.
If your renter has trouble making payments, it’s a situation that isn’t good for anybody, but you may be entitled to late fees. This extra income is important to collect, especially if you own a portfolio of rental properties. Also, you can be charged small expenses throughout your rental agreement, for home repairs. These little charges add up, so if you have some late fee income to offset the small expenses, you end-up in a better position over the long run.
Owning rental property can create nice returns if the home is properly managed and the tenants live up to their obligations. Screening renters thoroughly goes a long way in ensuring maximum rental income, because the wrong tenants can turn cash flows into a trickle. With the right strategy, you can realize your maximum income.